Pruksa – committed to constant growth

PRUKSA REAL ESTATE PLC’S president & chief executive officer Thongma Vijitpongpun.
“To achieve our revenue target of Bt100 billion in 2017, we have to be a multinational firm,” Thongma Vijitpongpun, president and chief executive officer of Pruksa Real Estate, the market leader among listed property firms with pre-sales of Bt20 billion in the first half of this year, said in an interview with The Nation’s Somluck Srimalee last week. He shared his ideas on how he is managing his business in order to achieve this goal.
How do you intend to become a multinational firm?
We have set up a team to study how to expand our business overseas. Vietnam, the Maldives, and India are the locations of our pilot projects, which will start to generate income this year. However, they will generate less than Bt500 million, compared with our pre-sales target of Bt29 billion this year.
We also are studying home-buyers’ behaviour and demand in Indonesia and Oman.
Indonesia has the potential to be the next country for our business expansion, because it has a growing population and the purchasing power to buy residences. Meanwhile, Oman’s potential depends on research. This project was initiated at the suggestion of an Omani businessman we invited for a visit in the first half of this year.
In China, we also have strong interest to expand our investment, but under China’s rules, when you develop a residential project, you have to use local constructors. As a result, if we expand our investment in China, we may only be involved in management and sales projects.
Why did you set the business goal of being a multinational firm?
That was not our business plan when we started in 1993. At that time, we thought that if we could drive our sales to nearly Bt1 billion, we would be a success. Then we faced the financial crisis of 1997, and the question became one of how to survive.
After that, we set yearly business targets until two years ago, when we asked ourselves how to drive our business with sustainable growth averaging 25 per cent a year in a way that would not be disrupted by cyclical problems like economic crises, political problems, etc.
To manage our business to achieve that goal, our team decided that we have to manage our business risk by expanding our business both here and overseas. This will balance our business risk. This follows our business expansion from the lower-income market 10 years ago, to the middle and upper income markets.
Currently, our customers cover all segments. That’s why the company was not badly hurt by the political problems in the second quarter of this year, and was able to achieve pre-sales of Bt20 billion in the first half of this year, which exceeded estimates.
Following this model, if we want to maintain business growth of 25 per cent every year from now till 2017 that means we have to expand overseas. The company also has to balance its income by targeting 60 per cent from the domestic market and 40 per cent from overseas by 2017.
Why have you set your business growth target at 25 per cent?
In my experience, most businesses have a life cycle: from starting, to high growth, to stable growth, to decline. With Pruksa Real Estate seeing strong growth, if we do not do anything, we will decline. If we don’t want to be like that, we have to change our business strategy from year-to-year business plans to setting a goal of sustainable growth averaging 25 per cent a year.
This goal is a challenge for us. If we want to achieve it, we will have to change ourselves. All related parties, such as shareholders, staff and customers, will benefit in the long term.
As management, we are committed to creating wealth for all parties, not just for ourselves.
[Pruksa recorded pre-sales of Bt20 billion in the first half of this year and plans to launch 50 to 60 new residential projects this year.]
How are you preparing your business structure to support your business growth plan?
We review our business structure all time. We have decentralised our management from the president and CEO to six senior executive vice presidents. Three of the six are authorised to manage multi-residential brands, and the other three manage back-office affairs, including construction systems, prefabrication manufacturing, accounting, information technology, etc.
Meanwhile, all of our multi-residential brands have business units to take care of the brand. The company now has 15 business units authorised to manage business units by themselves.
This business model is easy to manage and supports our expansion. Our overseas organisational structure will be flexible and depend on the rules in each particular country.
We have set up training systems and promote our staff to focus on their natural abilities.
What risks do you face and how do you manage them?
In the more than 15 years since I founded this business, I have faced at least two economic crises, and multiple political changes. These have been the major risk factors, but we have survived and recorded strong growth every year by learning how to manage risks on an event-by-event basis.
For example, in 1997 we faced the financial crisis. Our business strategy focused on how to survive the crisis. We didn’t suffer foreign-exchange losses, and we were focused on the lower-income market, which was less affected by that crisis than other sectors.
Then Thailand faced the global recession in 2008, which didn’t affect us too badly because our customers now cover all market segments.
The key to managing our business risk is managing cash flow and monitoring the market at all times. When we know who our customers are, we can manage our business in line with customer demand.
For example, in 1997, we focused on townhouses. In 2001, we entered the market for single detached houses. In 2002, we developed prefabrication systems to speed up construction of residences, reducing management costs and speeding up cash flow by allowing us to transfer ownership to our customers within 120 days.
In 2009, we started to expand our business overseas to balance our portfolio.
Expanding our investment overseas also limits our investment, because we must have sufficient capital in case our expansion results in a loss.
That is not always a successful formula, but it depends on the environment.
Do you have any plans to move into other property sectors such as hotels, offices, or retail?
For the time being, we remain focused on residential projects, in which we have long experience.
Who are your main competitors, now that you are the market leader?
We are our own main competitors. We don’t think of competitors as being out there in the marketplace. Strive constantly to improve: That’s my motto. It has been since the day I got into this business